Change - Causes 3.6 Managing change

What you need to know a) Causes of change: b) Possible effects on: changes in organisational size poor business performance new ownership transformational leadership the market and other external factors (PESTLE) b) Possible effects on: competitiveness productivity financial performance stakeholders

Change is a Process that All Businesses Have to Address Change management involves the process that ensures a business responds to the environment in which it operates

“Management is about coping with complexity. Handling Change is one of the Toughest Challenges Facing Business Leaders “Management is about coping with complexity. Leadership, by contrast is about coping with change” Professor John Kotter

Step Change & Incremental Change Significant & occurs rapidly Incremental change Change occurs over a period of time in incremental, small stages

Step Change Dramatic or radical change in one fell swoop Often required when a business has suffered from strategic drift Often involves significant alteration in the business Gets it over with quickly / decisively May require some coercion to overcome resistance Step change Significant & occurs rapidly

Incremental Change Many small changes which take place as a business develops and responds to subtle changes in the external environment Usually involves little resistance Arises as strategy develops

Distinguishing between Internal and External Causes of Change Internal Causes of Change External Causes of Change Arise from factors within the control of the business – i.e. the decisions taken by business management Arise from factors outside the control of the business – i.e. as a result of changes in the external environment

Examples of Causes of Internal Change New leadership (e.g. CEO) New ownership (e.g. following a takeover) Change in strategic direction & corporate objectives Significant investment decisions Changes to scope of business activities (e.g. business unit closures) Adjusting the organisational structure (e.g. delayering)

Examples of Causes of External Change Significant competitor actions (e.g. new products, takeovers) Political & legal changes (e.g. deregulation or new taxes) Significant changes in economic environment (e.g. post Brexit for UK firms) Longer-term changes in society (e.g. lifestyles, demographics) Technological change (e.g. rapid growth or mobile device usage and related market disruption)

Causes of Disruptive Change This is a form of step change that arises from changes in the external environment Disruptive change impacts the market as a whole, challenging the established “business model” (i.e. how products and services are sold) Rapid improvements in technology are the main driver of disruptive change since technological innovation provides new ways of delivering goods and services as well as reducing barriers to market entry

Examples of Industries Impacted by Disruptive Change through Technology MEDIA STREAMING Netflix | YouTube | Spotify | Apple iMusic & iTunes | Amazon Prime GROCERY RETAILING Ocado | Amazon Pantry & Fresh | Graze TRAVEL & ACCOMMODATION Expedia | TripAdvisor | airbnb FASHION RETAIL ASOS | Net A Porter | missguided CONSUMER FILE STORAGE Dropbox | Google Drive | Apple iCloud | Microsoft OneDrive

The Value of Change Whilst change is often viewed with concern by those affected, it is an essential part of business life The external environment, in particular, is constantly changing, which makes change a constant too!

Effects of a Business Embracing Change Helps sustain a competitive advantage (and respond to competitor changes) Aligns business strategy with evolving nature of customer needs & wants Business can take advantage of developing technologies Stakeholders (employees, shareholders etc.) gain from improved productivity and work environment Change in organisational structure may enable a business to improve the effectiveness of its communication and decision-making Being perceived as a business that leads change rather than follows it may bring market benefits (e.g. developing a reputation for innovation)

Branson on the Importance and Value of Change “Every success story is a tale of constant adaption, revision and change. A company that stands still will soon be forgotten.”